Ugly But Honest News 4-21-2017

Strong gains in home remodeling and repair activity are expected to ease moving into next year, according to our latest Leading Indicator of Remodeling Activity (LIRA) released today. The LIRA projects that annual growth in home improvement and repair expenditure this year will remain above its long-term trend of 5 percent, but will decline steadily from 7.3 percent in the first quarter to 6.1 percent by the first quarter of 2018.

Homeowners are continuing to spend more on improvements as house prices strengthen in most parts of the country. Yet, recent slowdowns in home sales activity and remodeling permitting suggests improvement spending gains will lose some steam over the course of the year.

While the decrease isn’t good, at least the LIRA is projected to remain above the long term trend of 5%. Some people will be remodeling their homes to increase the value, others to make it better fit their tastes and lifestyle. And of course there will be some that bought a fixer upper and are looking to repair or rehab it.

The NAHB Remodeling Market Index (RMI) rose to 58 in the first quarter of 2017, an increase of five points from the fourth quarter of 2016 and the highest reading in two years.

An RMI above 50 indicates that more remodelers report market activity is higher (compared to the prior quarter) than report it is lower. The overall RMI averages ratings of current remodeling activity with indicators of future remodeling activity.

NAHB Remodelers Chairman Dan Bawden said:

A milder-than-usual winter has led to increased remodeling activity and a positive outlook for spring. Remodelers are seeing stronger market conditions with customers more willing to spend money on both small and large projects.

This contradicts the report above and I hope it is not being overly optimistic.

The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.4 percent in March, following a 0.5 percent increase in February, and a 0.6 percent increase in January.

Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board said:

The March increase and upward trend in the U.S. LEI point to continued economic growth in 2017, with perhaps an acceleration later in the year if consumer spending and investment pick up. The gains among the leading indicators were very widespread, with new orders in manufacturing and the interest rate spread more than offsetting declines in the labor market components in March.

After rising for years, annual growth in the nation’s rents is flattening now — sliding below 1 percent year-over-year growth in March for the first time in more than four years. The median U.S. rent climbed 0.7 percent from last March — following a much faster clip of 3.3 percent growth the year before — as new construction began to meet renter demand. The median rent payment is now $1,408, according to the March Zillow Real Estate Market Reports.

Rent growth is expected to stabilize near its current pace. Zillow’s forecast for the coming year anticipates rents nationally climbing 0.9 percent from March 2017 to March 2018. A flatter growth rate will have lasting impacts on the market going forward.

The key thing to remember is that every time someone renews a lease, the rent is probably going to increase. But someone that has a fixed rate mortgage enjoys knowing that their monthly payment will stay the same.

Jonathan Smoke, Chief Economist at realtor.com, talked about what he calls a “Rental Affordability Crisis.” He said:

Low rental vacancies and a lack of new rental construction are pushing up rents, and we expect that they’ll outpace home price appreciation in the year ahead.

Housing is central to the health and well-being of our country and our local communities. In addition, this (rental affordability) crisis threatens the future value of owned housing, as the burdensome level of rents will trap more aspiring owners into a vicious financial cycle in which they cannot save and build a solid credit record to eventually buy a home.

While more than 85% of markets have burdensome rents today, it’s perplexing that in more than 75% of the counties across the country, it is actually cheaper to buy than rent a home. So why aren’t those unhappy renters choosing to buy?

Maybe you’ve already saved more than enough to purchase your first house. HousingWire reported that analysts at Nomura believe:

It’s not that Millennials and other potential homebuyers aren’t qualified in terms of their credit scores or in how much they have saved for their down payment. It’s that they think they’re not qualified or they think that they don’t have a big enough down payment.

Quite a few first-time home buyers think they they need a large down payment. This could be stopping them from buying their first house. It is possible for a first-time home buyer to save a 3% down payment in under 2 years!

If buying a home makes sense for you, the first step is talking to a lender. It is easy to find out how much mortgage you can qualify for!

The cost of moving goods, people and information is declining, with some items already in a steep and rapid descent. The catalyst for change is an array of new platform technologies that have pushed the cost of distance to the tipping point. By 2025, spatial economics will alter the way we live and work—faster and more broadly than many can imagine.

Some cities will continue to grow, but migration out of cities will surge, particularly to exurbs 50 miles or more from a city center—giving rise to new micro economies where people live, work and play. By 2025, the U.S. exurban population could outstrip the urban center population. This migration already has begun: Six million Americans moved out of city centers in the past decade, according to U.S. Census Bureau data. Although some center-city population levels have held steady or even risen, their share of the population has been dropping since 1990, while the exurbs’ share has been rising.

Bain analysis shows movement to the U.S. exurbs in the next 10 years could match Americans’ exodus to the suburbs in the 1950s and 1960s, which reached an annual peak of 8% of the population.

We sit in the middle of an area often referred to as Charlanta. Eventually, the I-85 corridor from Atlanta to Charlotte may turn into one huge exurb.

Despite moderate improvements over the first quarter of 2017, all four indexes of the National Multifamily Housing Council’s (NMHC) Quarterly Survey of Apartment Market Conditions remained below the breakeven level of 50. The Market Tightness, Sales Volume, Equity Financing, and Debt Financing all indicated continued softening conditions in apartment markets even as demand for apartment residences remains strong.

This is largely due to more apartments being available and shifting the supply-demand balance according to Mark Obrinsky, NMHC’s Senior Vice President of Research and Chief Economist.

At the heart of the industry-supported push to roll back the Dodd-Frank Act are claims by Republican politicians and industry representatives that the 2010 reform law has been killing lending. These assertions, however, should be backed by data.

According to the most recent Federal Reserve Bank of New York data, not only did aggregate household debt in the U.S. increase substantially in the fourth quarter of 2016, it did so across all loan types; residential mortgages, credit cards, student debt and auto loans all rose. As of Dec. 31, total U.S. household indebtedness was $12.58 trillion, a $226 billion (1.8%) increase from the third quarter of 2016.

In fact, Americans are just 0.8% below the peak level of $12.68 trillion in household debt from the third quarter of 2008. Before they seek to unwind the post-crisis regulations, politicians should remember that 2008 was not a great year.

Sadly, facts are often left out of political discussions. The banks and Wall Street want Dodd-Frank destroyed and I think they may win this battle…

Mortgage Rates Tumble Below 4 Percent

Freddie Mac just released their latest Primary Mortgage Market Survey and they reported that the 30-year mortgage rate dropped below 4% and hit the lowest level since November 2016!

30-year fixed-rate mortgages averaged 3.97% with an average 0.5 point

This is down from last week when it averaged 4.08%

Last year at this time, the 30-year FRM averaged 3.59%

15-year fixed-rate mortgages averaged 3.23% with an average 0.5 point

This is down from last week when it averaged 3.34%

Last year at this time, 15-year fixed-rate mortgages averaged 2.85%

Sean Becketti, chief economist, Freddie Mac said:

The 30-year mortgage rate fell 11 basis points this week to 3.97 percent, dropping below the psychologically-important 4 percent level for the first time since November. Weak economic data and growing international tensions are driving investors out of riskier sectors and into Treasury securities. This shift in investment sentiment has propelled rates lower.

Mortgage rates have again moved lower and extended the opportunity to buy a home while mortgage rates are at historically low levels. My advice to anyone thinking about buying a home is to talk with a lender. See what is possible for you and get the ball rolling!

If you have any questions about buying or selling a home in the Anderson South Carolina area, please shoot me an email!

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